The sentiment-linked New Zealand Dollar outperformed in overnight trade, with prices tracking an upswing across Asian stock exchanges. The MSCI Asia Pacific regional benchmark stock index added over 1.5 percent. The likewise risk-sensitive Australian Dollar failed to capitalize on the chipper mood, with prices weighed down by a disappointing jobs report.

The publication of ECB meeting minutes headlines the economic calendar in European trading hours. Traders will be on the lookout for any additional clues suggesting an expansion of stimulus is on tap in March. Comments to that affect are likely to weigh on the Euro and boost overall risk appetite, offering support to commodity-bloc FX while punishing funding currencies like the Japanese Yen.

Later in the day, scheduled commentary from San Francisco Fed President John Williams enters the spotlight. While he is not a voter on this year’s FOMC, Mr Williams is seen as a close confidant of Chair Yellen having been her research director while she ran the central bank’s San Francisco branch. With that in mind, markets ought to be very interested in his assessment of the likely 2016 rate path.

The US Dollar saw a muted response to the release of minutes from January’s policy meeting, which underscored officials’ unease with the breakout of market volatility at the start of the year. A cautious tone in subsequent comments from St. Louis Fed President James Bullard – heretofore on the hawkish side of the spectrum – likewise passed with little fanfare.

Similar news-flow might have been expected to hurt the greenback as recently as last week. The absence of fireworks suggests that investors may have acclimated to the dovish shift in priced-in bets. Fed Funds futures suggest traders abandoned bets on further 2016 tightening last week.

This makes for an asymmetric landscape that ought to color how markets respond to Fed-related developments. News-flow supporting the new dovish status quo seems likely to be met with little enthusiasm while clashing headlines produce an outsized response as traders scramble to readjust exposure. This opens the door for a big-splash USD rally in the event that Mr Williams breaks with his colleagues’ timid posture.

Where does the DailyFX team expect the US Dollar to go in 2016? Find out here!